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Investors’ compensation claims overwhelm protection fund

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The Investors’ Protection Fund (IPF) of the Nigerian Stock Exchange (NSE) currently has total net assets of N872 million but 379 investors who submitted claims for compensation and were verified by the board of trustees of the IPF claimed they lost N1.69 billion.
The IPF is a statutory fund established pursuant to Part XIV, Section 197 of the Investment and Securities Act 2007 (ISA) to compensate investors who suffer pecuniary loss arising from the revocation or cancellation of the registration of a dealing member firm by the Securities and Exchange Commission (SEC), insolvency and bankruptcy or negligence of a dealing member firm of the Exchange.
The IPF also compensates for defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a dealing member firm.
The board of trustees of the IPF said it has only approved payment of N40.63 million as compensations to 154 claimants, in the fund’s maiden compensation payment. The rules guiding the IPF caps maximum compensation at N400,000.
Out of the 154 claimants, 81 would be paid full value of the loss of their investment while 73 will receive below full value of the loss of their investment. A total of 78 claimants will receive exactly the maximum compensation of N400,000 including some with full value of loss and others with losses above the compensation.
According to the IPF, the highest claim before the fund was N185 million while the lowest claim was N1,400.
Vice chairman, board of trustees, Investors’ Protection Fund (IPF), Mr. Fubara Anga, announced payment of compensations to first batch of investors that had suffered pecuniary losses from infractions by stockbroking firms.
He noted that the commencement of the payment of compensations marked a major turning point for the Fund, pointing out that the fund had gone through a long, rigorous and transparent process and had worked in line with global best practices in reaching decisions on various issues regarding the IPF.

Read also: NSE to pay N42.2m compensation to 158 investors

“It’s a modest beginning, but it’s a beginning and I believe that it’s something that will snowball into something bigger,” Anga said.
He added that while most of the claims by minority retail investors have fallen below the maximum compensation of N400, 000, investors that suffered higher losses could still pursue their rights to justice and redress through all available legal enforcement channels.
In his remarks, chief executive officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema said the IPF shows the commitment of the NSE to continuous development of initiatives that will bolster confidence in the capital market.
“Though the compensation payment may not be a complete restoration, it is a show of good faith on our part to investors. I thank the board of trustees for their guidance and commitment, the claimants for their valuable patience, and all other stakeholders for their contributions towards the success of this exercise,” Onyema, who also sits on the IPF, said.

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